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Next Silicon Valley? Berlin’s battle to be a tech hub

The world is full of Silicon Valley wannabes, invariably dubbed “Silicon Something”, from Silicon Glen in Scotland to Silicon Savannah in East Africa to Silicon Gulf in the Philippines, but none of them approaches the real deal in northern California.

But Berlin does have some of the factors which might lead it in the right direction, namely bright people who attract more bright people from all round the world plus low rents on property where ambitious companies can set up and expand.

Take SoundCloud. It set up in Stockholm but moved to the German capital and took off.

It’s a website where people share sounds – a kind of YouTube for the ears.

Bands use it to put up new recordings; politicians, including President Obama, use it for distributing their spoken thoughts (from speeches to podcasts); and ordinary people use it to share everyday sounds, from the sound of a baby gurgling to the first birds of Spring.

The idea came from two people with music backgrounds who collaborated in Stockholm. They realised they needed to share but also discuss the sounds they were creating, so they developed the platform to do it: SoundCloud.

And then when they got ambitious, they moved because they felt that Berlin had the right, vibrant music scene. One of the men, Alexander Ljung, is now the company’s chief executive and the other, Eric Wahlforss, is now the chief technical officer.

They flit between their offices in London, Sofia, San Francisco and New York to get the right combination of access to capital, talent and ideas, but with Berlin as the base.

Embracing risk

David Noel, SoundCloud’s “VP of Community” says one factor helping Berlin become more like Silicon Valley is that the attitude to risk is changing.

“If you fail in Europe, you have the stigma of failure that you carry around. When I look at Berlin that is changing, so we’re not talking about failure as a bad thing but we’re talking about failure in a way that it lets us become better next time”.

The tech companies which seem to thrive in Berlin often, like SoundCloud, seem to be about social networking.

The social game developer Wooga is based in Berlin. Research Gate, a networking website for scientists, is also based in the German capital.

And so is Zoobe. It’s a company which has developed a phone app so people can record a message which then synchs with an animated cartoon character such as a Smurf or Street Fighter Ryu or Rudolph the Reindeer.

The animated message can then be sent to a friend. The dragon or rabbit or Smurf appears on the friend’s phone, reading out the message in the sender’s voice.

Just as SoundCloud was devised by people with an audio background who saw possibilities, so Zoobe was developed by a man with a video background who saw possibilities.

Founder and chief executive Lenard Krawinkel told the BBC: “Berlin is sexy at the moment. And it’s cheap so you can rent space cheaply. You can employ people for far less money than in San Francisco – and even for far less money than in Asia.”

However, a few companies making it easier for people to communicate with each other does not add up to the new Silicon Valley.

Berlin is going in the right direction but it’s got some way to go, according to Ciaran O’Leary, a partner in the Early Bird venture capital firm: “It’s still a very young and small ecosystem but it’s on an amazing trajectory. I think Berlin still needs a couple more years to really be one of the top one or two places in the world.”

Long way to go

In a recent global ranking of cities with the most tech start-ups founded in the last 10 years which have gone global or received significant amounts of capital from the big funds, the top three spots were occupied by California’s Silicon Valley, with 201 start-ups, New York (144) and London (90).

Berlin had 27, just ahead of Bangalore on 26 and Sao Paulo on 21.

What Berlin may have is that indefinable quality which is an aptitude for innovation.

Since the fall of the Wall in 1989, the city has been reinventing itself. The vibrant alternative culture which thrived in West Berlin remains in place in the united city.

Property is also cheap compared with London, New York or San Francisco.

The average annual cost of a workstation in an office in Berlin, including maintenance costs, taxes and rent, was $8,410 at the end of last year, compared with $14,050 for New York and $14,620 in the City of London, according to a report published by the global property company DTZ.

Low rents do not a Silicon Valley make. But bright people with ambition might.